The Korean economy was boosted by a rise in government spending in the fourth quarter of 2018, with its quarterly gross domestic product (GDP) increasing by 3.1 percent compared to the same period of 2017. This figure represented the fastest growth in five quarters. GDP grew by one percent quarter on quarter, which was the fastest in three quarters.

The Korean government expanded spending by 3.1 percent on-quarter, recording the biggest increase in almost nine years. The surge in government expenditure helped stimulate construction and capital investment in the fourth quarter, which grew by 1.2 percent and 3.8 percent respectively compared to the previous three months.

There was a one percent growth in consumer spending for the fourth quarter on the back of increased expenditure on services such as entertainment, medical and health care services. Private consumption expanded by 2.8 percent for the whole year, up from 2.6 percent in the prior year.

Exports decreased by 2.2 percent on quarter, reflecting the trend of falling outbound shipments of semiconductors. In particular, exports dipped unexpectedly in December 2018 due to a sharp fall in shipments to China. This added to concerns over the slowing economy. Weakening growth momentum in China and the U.S. could dent demand for Korean exports including memory chips and petrochemical products, posing risks to the export-driven economy.

For the whole of 2018, the economy expanded by 2.7 percent, the slowest growth in six years. Declining corporate investment was the main factor that drove down economic output. Construction investment contracted by four percent, recording the biggest drop since the Asian financial crisis in 2008, while equipment investment growth shrank to a nine-year low of -1.7 percent.

Meanwhile, private consumption, fiscal spending and exports helped shore up the economy. A recovery in consumer spending continued, with its growth rate climbing to a seven-year high of 2.8 percent in 2018. Government expenditure expanded by 5.6 percent, the sharpest on-year jump since 2007. The economy was also bolstered by a robust export growth of four percent in 2018 compared with 1.9 percent in 2017.